Taleb Black Swan ETF

Mark Spitznagel, who now runs Universa out here in LA, and who worked with NNT at Emperica is launching an ETF that will emulate their style of management for institutional investors.

Here’s how the article starts off:

“With Santa Monica’s trendy beaches a block away, Mark Spitznagel and three fellow traders spend their days placing a couple dozen bets that a disastrous event will rock equity markets or cause inflation to soar. On roughly 95 trades out of 100 they lose money.”

Some takeaways from the text:

First of all, Santa Monica’s beaches are not trendy to say the least, but I guess saying so give a better contrast to Spitznagel’s look. The runoff meets the Pacific ocean in Santa Monica. Anyone who has a brain on the Westside is either heading up to Malibu, or going to the South Bay – Manhattan Beach, Redondo Beach, or Hermosa Beach…but I digress…

What do you think of the mathematical expectation of a Universa trade? If such a trader has a 5% accuracy rate, what does the ratio of the average winner to average loser have to be for the ethos to be worth while investment?

What does that say about the manager’s need to be correct – do you think Spitznagel’s ego is tied up in his need to be correct?

“People have a natural bias to look at returns and not to look at possible losses,” says Taleb. “If you reduce big losses, your overall returns will be higher.”

I’ve always said, that your winners will only look like winners to the extent you keep your losses small.

Hat tip Meb Faber.


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